Pension Arrangements

Company Pension Arrangements

At a minimum, Irish companies must legally offer a Personal Retirement Savings Account (PRSA) arrangement to their employees. Encouraging pensions in your workplace can make a huge difference to your employee’s overall retirement position in the future.

There are a number of alternative arrangements to a PRSA which can be explored, should the employer like to top up any individual’s pension contribution. Any Occupational Pension (Company) Scheme is a great way to attract and retain talent to your organization in an incredibly tax efficient manner.

The different company options are as follows:

PRSA arrangement for employees

Company Pensions, also known as, Occupational Pension Schemes

Executive Pension Scheme

Small Self-Administered Scheme

Group Scheme

Additional Benefits

PRSA arrangement for employees

This is the minimum legal requirement in Ireland. As an IFA, Progressive Financial Services can set this up quickly, communicate to your staff, and train your payroll administrator in. The key points of a PRSA arrangement are:

Employer does not have to contribute

Employer must facilitate employee contributions via payroll

Employee’s decision to avail of the PRSA provided by the employer or go private.

PRSA belongs to the employee and there is no trustee requirement.

Contributions by the employer to the employee’s PRSA are treated as a Benefit in Kind and are not tax efficient. If, as an employer, you want to contribute you should get advice from an IFA on changing the structure.

Contributions by the employer and the employee fall under the individual’s revenue limit based on their age:

Age

Maximum Contribution from gross salary(capped 115,000 per year)

Under age 30

15%

30 - 39

20%

40 - 49

25%

50 - 54

30%

55 - 59

35%

60 and over

40%

*The 30% limit applies, irrespective of the lower actual age, to certain categories of professional sportspersons.

Company Pension Schemes

As an employer you may want to provide a company pension to your employees. This is a tax efficient way of providing extra benefits as part of the job. There are a number of advantages:

Employer contributions are treated as a business expense and avoid Employee PRSI

Staff retention and satisfaction is improved with the extra benefits

Auto Enrollment may be on the cards for Ireland, and you will be ahead of the curve

The vehicle you use for your staff depends on the business legal entity and what benefits you want to provide. If you are a limited company there are a number of options available, as listed below.

Executive Pension or Small Self-Administered Schemes

Executive Pensions are a one-person pension arrangement often used by the directors of a company and/or for key employees. They can be set up in parallel to the company group scheme or PRSA.

Some benefits of Executive Pension and Small Self-Administered Schemes:

Allow self-direct investment into wider areas such as shares or commercial property

More control and privacy as you are not part of a wider group scheme and therefore get to choose your own investment vehicle

Ease of trusteeship with simple training requirements

Also an exceptional way to plan sale/exit from your business, lump sums into your pension can avoid capital gains tax and income tax. Planning in advance and getting money advice from an IFA can save you a significant amount of tax in the future.

Group Schemes

Group Schemes are arranged for all staff, with rules tailored by the employer. For example, the employer may only offer the pension to employees who have been with the company for 2 years, or after probation ends. The key points of a group scheme offering are below:

Pension Administrator & Fund Manager chosen by the employer

Deduction taken at source from payroll

Trustees can be internal or external

Contributions can be voluntary or mandatory

Employer must make a “meaningful contribution” but can choose what level they want to contribute in addition to that.

Employer contributions are treated as a business expense and not subject to Employer PRSI

Progressive Financial Services takes the company objectives to market and comes back with the best solution for their company needs.

Additional benefits may be added on to complete the employee benefit package.

Additional Benefits

Tax relief makes setting up long term death benefits through your pension attractive. Employers can also add on serious illness, income protection, and health insurance. Most benefits can be treated as a business expense, while some are treated as a benefit in kind.

With a list of employees’ dates of birth and salaries, Progressive Financial services can go to the wider Irish Market to price a group benefit scheme. Normally these must be mandatory for all employees, and there are no underwriting requirements for all those who fall within the average salary range.